Factors influencing Coca-Cola Sabco acquisition strategy in Kenya

Abstract

Despite the burgeoning literature on acquisition as a growth strategy and its wide spread use currently by firms globally, little is known and documented about the factors that drive subsidiaries in the franchise territory to adapt a particular growth strategy in a given country. This is contrary to the fact that global and multinational firms for instance, Coca-Cola Sabco Company formulates clear strategies for competing with other players in the industry at global level. This study was to determine the factors (organizational and individual) that drive Coca-Cola Sabco Company to go for acquisition strategy in Kenya and to establish the relationship between the number of firms acquired and overall firm profitability between the years 2000 and 2009. A cross-sectional survey research design was used for this study and a census was conducted on all the 84 targeted respondents. A questionnaire with structured and unstructured questions was used to collect primary data from all 84 top managers of the company since they are the key decision makers. Secondary data was collected by going through the company’s organizational structure and financial statements. Spearman’s correlation analysis, ranking and descriptive analysis were used to analyze the specific objectives with the help of SPSS computer software. The results show that, when organizational factors that influence the company to acquire other plants were ranked, to increase diversification was the most influential factor as it ranked number one and was followed by R&D which ranked number two, need for technology ranked number three, market share and balancing cost and revenue ranked number four and to reduce competition ranked number six. For individual factors, the need for more power came first, followed by achievement, sensation seeking and prestige respectively. The profitability of the company increased over the years but the impact of the acquired plants on the overall profitability in subsequent years was very minimal as indicated by a weak positive correlation coefficient of I=0.3499, p=0.00l3 which was statistically significant. This study recommends further research on the acquisition process to establish whether the acquisitions done are partial or full acquisition. Further, the business environment varies from industry to industry and from country to country, hence a similar study should be conducted to ascertain whether similar results/findings on factors that influence a company to adapt acquisition strategy hold